The success of any business is directly affected by the performance of the employees within the organization, whether or not those employees are dealing directly with customers. Businesses that clearly understand the impact of their employees' performance are better able to manage employee output and productivity. Properly managing employee performance helps any business to increase profits and consistently meet sales goals.
In a business where employees deal directly with customers, such as a grocery store or furniture sales organization, there are many ways by which employee performance affects profits. For example, making a good first impression can make or break any potential sale, especially larger sales such as automobiles and home improvements. When an employee is not performing up to company standards, sales are negatively affected, as well as the company's reputation.
Another important factor of employee performance that directly impacts business is productivity. Productivity also has a ripple effect in the workplace, meaning that consistent levels of productivity and work habits set the standard for other employees as well. And whether a retail business or a manufacturing plant, when employees are producing more efficiently the business' profitability and bottom line will be positively affected.
Employee retention and turnover affect an organization. When an employee leaves an organization prematurely, the financial investment in the employee's training is lost. For example, some sales organizations invest two months or more salary while simply training an employee before that employee is ever given an opportunity to start selling and making back profits toward the initial training investment.
Some very large businesses, such as chain grocery stores and department stores, often cut down on employee costs (therefore performance) while still maintaining maximum profitability. These companies keep employee pay, benefits and training at a bare minimum, which has a negative effect on performance. But these businesses offset the losses from poor performance by severely cutting costs on insurance, pay raises and quality training programs. In these companies, the large buying power allows them to offer much lower prices than competitors, which helps customers to continue shopping there despite the poor employee performance.
Other than very large companies, improving performance will generally have a positive impact on an organization's profitability. Providing competitive pay, health insurance and a positive work environment are some of the most common ways to improve employee performance by improving morale. Providing employees with adequate training and the opportunity for advancement also improves performance and productivity.